Churn rate is the percentage of customers who cancel or stop using a product during a given time period. It is calculated by dividing the number of customers lost by the number at the start of the period. For SaaS, monthly churn below 2% is generally considered healthy.
Churn Rate = (Customers lost ÷ Customers at start) × 100
Calculated monthly or annually. Monthly churn of 2% equals ~22% annual churn.
Churn rate measures how quickly a business is losing customers. For SaaS companies, even small improvements in churn have compounding effects on ARR. A company with 1,000 customers and 5% monthly churn loses 460 customers per year just to stay flat — meaning growth spend goes to replacing lost customers rather than growing the base.
Customer churn counts the number of accounts lost. Revenue churn (or MRR churn) measures the revenue lost from cancellations and downgrades. A company can have low customer churn but high revenue churn if its largest accounts are leaving. Track both: customer churn for volume health, revenue churn for financial health.
The most effective churn reduction tactics are: (1) collecting feedback from churned customers to understand root causes, (2) improving onboarding so users reach their 'aha moment' faster, (3) identifying at-risk users through engagement signals before they cancel, and (4) proactively reaching out to disengaged accounts. Churn is almost always a product or expectation problem — not a pricing problem.
| Level | Churn Score |
|---|---|
| World-class (monthly) | <0.5% |
| Good (monthly) | 1–2% |
| Average (monthly) | 3–5% |
| Critical (monthly) | >5% |
FeedbackJar captures user feedback directly in your product. Improve Churn by acting on what users actually tell you.
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